With New Ruling, Solar Panel Battle Heats Up in Midwest

July 14, 2014

Skirmishes between solar power supporters and electric utilities are intensifying, with standoffs in Iowa and Wisconsin attracting attention around the country.

Most recently, in a decision cheered by solar advocates, the Iowa Supreme Court on Friday rebuffed concerns raised by Iowa regulators and Madison-based Alliant Energy Corp., which argued that a solar company’s move to install panels on the roof of a government building in Dubuque unfairly competed with Alliant’s monopoly electric utility in Iowa.

The 4-2 court decision could trigger a surge of solar power projects in the Hawkeye State by companies that build and own solar panels and lease them to homeowners and small businesses.

The leasing trend helps reduce upfront costs to install solar panels and has spurred a wave of solar power growth in states that have allowed it.

In Wisconsin, Milwaukee-based We Energies proposed late last month to bar its customers from leasing solar panels. The company also sought to impose a new surcharge on customers that generate their own power.

Those proposals — filed a month after We Energies first introduced its rate plan for 2015 — are generating interest in what are generally arcane proceedings dominated by utilities and in-state consumer and green-energy advocates.

Eagle Point Solar, based in Dubuque, installed a 175-kilowatt system on top of the Dubuque city building in 2011. Alliant Energy, the electric utility that serves the city, appealed to Dubuque’s city council, then to the state’s utility regulator, claiming that the project would violate the law. Alliant argued that Eagle Point would be functioning as a utility, and thus impinging on the utility’s legal monopoly over electrical service in Dubuque.

The Iowa Utilities Board ruled that Eagle Point was, in fact, functioning as an illegal utility. The ELPC and other renewables advocates appealed to the Polk County District Court, which in 2013 reversed the regulator’s ruling. The Iowa Supreme Court then opted to review the case.

Eagle Point’s president and CEO, Barry Shear, was busy hosting out-of-town visitors on Friday. He found just enough time to say, “There’s nothing not to like about this ruling unless you’re a coal miner in Virginia or a utility in Iowa.”

Third party financing

The case basically turned on a funding mechanism known as third party financing. It allows a party other than the solar installer or provider to finance, own and operate a solar installation on another entity’s property, providing energy to the property through a power purchase agreement.

Entities without any tax liability – governments, non-profit institutions, some hospitals and schools, for example – cannot collect tax credits for renewable energy. Hence such third party power purchase agreements are often crucial to making the finances of rooftop solar work.

Meanwhile even many people or institutions who can collect tax credits have trouble coming up with capital to install solar panels. Tim Dwight, a solar developer in Iowa, said that the typical residential solar installation now costs in the neighborhood of $16,000. Although almost half of that could be covered by the federal and Iowa state government credits, the remaining funds can be a barrier for homeowners or business owners; and banks are often reluctant to make loans for solar installations. Hence third party financing can be crucial for a wide range of solar and other renewable applications.

Dwight predicted that today’s ruling will help turn small-scale renewable energy projects into an attractive investment opportunity for insurance companies, banks and even individual investors.

Klein predicted that the court ruling “will open up [solar] to a broader set of Iowans. It’s been very successful in opening up solar in other states. I think this is one of those baseline policies that lays the ground for solar growth.
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Officials at Alliant Energy, which has lost nearly 600,000 kilowatt hours in sales to the City of Dubuque since the solar panels started producing in 2012, have mixed feelings about today’s ruling, according to spokesman Justin Foss. “It’s been painted that this is a fight between the utility and renewable energy,” he said. “It’s anything but the truth.”

Foss said Alliant maintains “unwavering” support for renewables, and for integrating them into the utility’s distribution system. There are now about 670 renewable energy generators on Alliant’s system in Iowa, “and more people asking to connect to the grid every day,” Foss said. He added that customers will still be reliant on power provided by Alliant when the sun isn’t shining or the wind isn’t blowing.

“We have a financing model that hasn’t changed,” he said. “If nobody’s buying energy, in the middle of the night, there’s no one to pay for the power plant. We have two sets of generation. The problem is, there are lots of costs involved. What will be the impact on our customers? And how will this affect their costs?”

Klein acknowledged that the growth of distributed generation raises tough issues for utilities.

“One of the important aspects of the case is that it says that the purpose of utility regulation is to protect the public, not the utility industry,” he said. Generating one’s own power “behind the meter” — meaning it doesn’t move through a utility’s distribution system – is a private transaction and should not be subject to interference by a utility, Klein said.

Even so, he said this ruling clarifies the need for utilities and the renewable energy advocates to collaborate.

“We can’t have policies that single out customer generation and try to kill it,” Klein said.

All these battles and complicated issues about who can profit here or there, who has tax liability – indeed, why third-party is a “brilliant” idea – this is all just smelting impurities.

All the complications disappear when utilities are purely public (the refined metal)- so that profits AND costs are shared by the public. Gone are the needs for short-term profits and short-term planning. Gone are the needs for business agendas which are anti-renewables. You wind up with a 24 carat system – built for the lowest cost and providing the cleanest and least expensive product possible.

It seems to me in the long run, it is unavoidable that all energy utilities will be forced to adopt the public model if only through economic pressures. Public utilities simply win on economics because they don’t have to distribute additional profits. The irony is that we need all those skilled people and infrastructure of all the utilities even as carbon-free renewables become the major and then only form of energy we use.

I suppose in a cruel world we could just let their business model deteriorate so much that they would be begging to be absorbed into a pure public system, but wouldn’t it be better to be visionary about this? The sooner we straighten out these issues, the sooner it will be much easier to start building the huge amounts of new renewable generation we will need, and build it in a strategically intelligent way.

Utilities have been publicly regulated monopolies already. They have not been government owned, however. Some balk at the idea of government run business, as the government usually does not know how to manage it. The situation is complicated today, with a range of controlling regulators from federal, FERC, regional independent system operators (ISOs), and state public utility commissions. It’s a messy mix that has generation, transmission, dispatch, and regulation spread over many entities. There is a glaring need for a public transmission system like the highway system. It is odd the transmission system is so antiquated and worn out. When deregulation happened, not only did business run wild with excesses like Enron that stole states coffers, they neglected the transmission infrastructure, leaving it badly in need of repair and modernization. I am in favor of a supra nationwide public transmission system for the benefit of all.

Tim Dwight, a solar developer in Iowa, said that the typical residential solar installation now costs in the neighborhood of $16,000. Although almost half of that could be covered by the federal and Iowa state government credits…

In other words, the costs are socialized, the benefits are privatized. Isn’t this the sort of thing that the left is supposed to be dead-set against?

Net metering users retain the grid connection, because they still need the grid. The utility still has to maintain the systems to supply those users’ power demand. Those users should have to ante up a monthly charge for the amortization and maintenance of the generators, wires and transformers required to meet their peak demands, with lower fees for actual kWh consumed (essentially a fuel charge). If they find that their PV economics no longer work, they are in the same boat as the utility: the economics don’t work for the utility either. The only reason anyone installs grid-connected PV is because they are subsidized or a hobbyist.